Greenbrier, Watco set railcar repair joint venture

The Greenbrier Cos., Inc. and Watco Companies, LLC announced early Wednesday, June 4, 2014, a new company that will create a North American network of railcar repair shops.

The new company, GBW Railcar Services, LLC (GBW), is a 50-50 joint venture “that will own and operate Greenbrier’s and Watco’s respective railcar repair, refurbishment, and maintenance businesses,” the companies said.

GBW Railcar Services will create “the largest independent railcar repair network of 38 locations across North America, including 14 certified tank car shops,” the companies stated, adding, “GBW will have the scale to meet the certification and maintenance requirements of the growing North American tank car fleet and expand railcar repair service offerings for general freight cars of nearly all types.”

GBW will be led by a recent Greenbrier hire, Jim Cowan, as CEO. He will continue to serve as Senior Vice President, Operations for Greenbrier and maintain certain responsibilities at Greenbrier unrelated to GBW.

Greenbrier now operates 23 locations and Watco currently operates 15 complementary sites (see map). GBW’s combined network will feature 14 tank car repair shops—10 of which will be from Watco and four from Greenbrier—all certified by the Association of American Railroads as required by federal regulations, the companies said.

Additionally, all 38 locations can perform the type of general freight car repair and maintenance services “that are consistently in demand and which are a core competency of both Greenbrier and Watco.”

The companies noted that Greenbrier provides commercial strength and leadership in railcar safety design and engineering, including its recently developed “Tank Car of the Future.” Greenbrier also contributes its geographically dispersed railcar repair, refurbishment, and maintenance network. “Combined with the experience derived from our integrated business model including manufacturing, leasing, and railcar management services, Greenbrier’s leadership in the rail industry will be a strong contribution to GBW,” Greenbrier said.

For its part, Watco brings to GBW “some of the broadest tank car expertise available in the market, along with substantial general railcar repair capability through a well-established and efficient railcar repair platform,” Watco noted.

In addition to its repair operations, Watco said it “has a broad customer base and operating footprint as one of North America’s largest short line railroad, port, and terminal management companies. Watco contributes a broad range of repair services to GBW. Watco’s multiple tank car repair facilities in the Midwest, Gulf, and Southeastern U.S., a fast growing region for petrochemical businesses, will further position GBW for success. Watco, along with its partner Kinder Morgan, is a leading provider of transportation and terminal services to major Gulf ports for energy businesses serving the Bakken formation and other energy fields.”

“We both saw a need to increase capacity,” Watco CEO Rick Webb told Railway Age. “Our customers require new and better services as the result of the energy evolution. The industry has changed. And we’re prepared to invest substantial capital to upgrade certain shops, to meet or exceed our customers’ expectations.”

”This is a good move for us,” Greenbrier Cos. Chairman and CEO William A. Furman told Railway Age. “The energy renaissance has created a lot of opportunities. The Gulf Coast area alone, for example, is seeing $100 million in downstream energy investments.”

“Our customers will be able to go anywhere in the U.S. or Canada where there is a GBW facility for fast, quality service,” said Watco Chief Commercial Officer Ed McKechnie. “We’ve created a North American platform that will be able to turn cars around as quickly as possible.”

“This combination establishes GBW as a clear leader in the business of making tank cars safer at any speed,” Furman noted. “Demand for tank car retrofit services from our customers to address the growing need for safe rail transport solutions has become robust. Greenbrier’s and Watco’s shared approach to tank car safety advances both public safety and environmental protection, and strengthens the North American tank car fleet. Working together, we will drive improvements in public safety while preserving the economic benefits of crude by rail and the North American energy renaissance. Jim Cowan’s operations expertise, particularly his recognized ability to expand gross margins and increase return on invested capital, is the key ingredient that will allow GBW to achieve its full potential.”

Added Webb, “The combination of our repair businesses creates additional opportunities to serve the customers of both companies. GBW will utilize Greenbrier’s and Watco’s strengths to find new and better ways to offer railcar services to our customers in a manner that creates value for them and for GBW. Together, these combined attributes will make GBW stronger than the sum of its individual parts. Moreover, we are thrilled that Jim Cowan, with his unique skills, will lead GBW.”